Inderscience Publishers

Reforming venture capital in India: creating the enabling environment for information technology

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The paper analyses the need for venture capital in India to support the growth of its Information Technology industry. It is shown that the growth of a venture capital industry in India will help sustain growth at current levels with less risk, but that substantial changes in the regulatory, tax and currency environments are needed. An ideal environment is proposed, benchmarked against the US environment and used to develop a set of proposals for reform. The Indian venture capital regulator, the Securities and Exchange Board of India, recently accepted a report based on these proposals and the Ministry of Finance has put some of the proposals into law. An analysis of the accepted proposals shows the least progress in currency reform and in prudent expert rules. The forecast is for modest growth of the venture capital industry, with substantial growth unlikely until the remaining proposals are accepted.

Keywords: venture capital reform, India, information technology, regulatory environment, tax environment, currency environment, prospects for change

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